DEC 13 — 2020 has been a dark year for most, but it has been a boon for tobacco smuggling and illegal trade in the Asia Pacific. Just recently, a Malaysian woman was sentenced to two years’ jail for her part in a sophisticated money laundering and tobacco smuggling operation for a large global crime syndicate.
Meanwhile, over in Singapore, this year saw the largest haul of duty-unpaid cigarettes seized in a single operation and, in New Zealand, police seized over 2.2 million cigarettes thought to be linked to a Malaysian crime syndicate. These are just a few examples of the black market operations that have been thwarted this year.
KPMG’s annual survey of tobacco consumption in Australia found that illicit tobacco increased from 14 per cent of the market in 2018 to over 20 per cent in 2019.
A total of 3.1 million kilograms of tobacco, loose and packaged, were smuggled into the country, avoiding A$3.41 billion (RM10.4 billion) in excise. This was despite a 46 per cent increase in tobacco seizures by the Australian Border Force.
So why is this happening? The simple answer is high prices on tobacco and cigarettes due to heavy taxes. In fact, Australian Federal Police telephone intercepts witnessed the Malaysian smuggler revealing that the cigarette imports were “only about the dodging of tax, so Customs should not be interested.”
It’s true that most countries impose taxes on tobacco, for two reasons. The first is that it’s an effective revenue raiser. In the last financial year alone, the Australian government raised almost $16 billion from smokers. This was actually lower than expected due to the impact of the coronavirus. The second justification is that it discourages smoking. This has been shown, at least in Australia, to be a myth; smoking rates are not falling.
Pre-2012, the percentage of daily smokers, aged 14+, in Australia, had been in decline for more than 20 years. After 2012, which saw the introduction of plain packaging and tax increases, the rate of decline slowed by almost half. The proportion of smokers planning to quit did not change. This is according to the Australian Institute of Health and Welfare’s (AIHW) 2019 National Drug Strategy Household Survey, which was released in July of this year.
Cigarettes in Australia are the most expensive in the world, retailing at around A$1.20 per stick. With the price of an entire pack costing less than this in some countries, it’s no wonder illegal trade has taken off. There is enormous incentive to smuggle tobacco products into Australia.
This year’s coronavirus pandemic may have actually aided smugglers and criminal syndicates in their activities, as law enforcement officials have been focused on patrolling state borders.
It is estimated that criminal organisations make a profit if as few as one out of three shipping containers of illicit tobacco gets to Australia, so the potential profits far outweigh the risks.
With smugglers becoming increasingly organised, sophisticated and dangerous, the reality is that it’s often more than cigarettes being trafficked.
It looks as though Australia may have finally woken up to the dangerous reality of the situation, as the joint committee on law enforcement has found there to be serious problems with the country’s approach.
This includes the federal taxes that have more than doubled the price of cigarettes over the past seven years.
Australia is due to publish a long-awaited report on the illicit tobacco market, but it’s unlikely the federal government will reverse its draconian smoking policy. That said, the acknowledgement that existing policy hasn’t worked is a great start.
The obvious solution would be to remove the incentive to smuggle tobacco by reducing the excise. Smokers would buy their favorite legal brands if they were cheaper, legitimate tobacco retailers would not be competing against illicit suppliers, and less money would be spent on law enforcement.
Malaysia, like Australia, is taking a stand against illegal tobacco, but it’s vital that it learns from history and doesn’t make the same mistakes as Australia.
* Jo Furnival is a freelance writer based in Australia.
** This is the personal opinion of the writer(s) or organisation(s) and does not necessarily represent the views of Malay Mail.
